Berkshire Hathaway Create a presentation, the first few slides should briefly outline the highlights of your milestone paper. The remainder of your presentation is meant
Berkshire Hathaway
Create a presentation, the first few slides should briefly outline the highlights of your milestone paper.
The remainder of your presentation is meant to be a pitch of your own idea for a quality management program. Your pitch should address the following questions:
a. Who will you include on the deployment team and why?
b. How will you structure and manage the team to optimize their success?
c. What quality management tool are you proposing be implemented and why?
d. Why is this particular tool a good fit for this organization or the problem you are trying to solve?
e. How will the new tool you are proposing impact overall quality (service quality or product quality)?
Your final milestone submission should follow APA format, be well supported with a minimum of five recent sources, and be a minimum of 20 slides long.
Be sure your PPT is well assembled, using a design template (not a plain white sheet), minimal text on the slide (bullet point lists, not paragraphs of text), and incorporates graphics where appropriate. Use the speaker notes section to indicate what you would say if you were giving the presentation. The speaker notes section is mandatory.
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Final Milestone
Sarah E. Brennan
University of Arkansas at Grantham
MGT500 – Management
Professor Esplin
03/07/2023
Berkshire Hathaway is an American multinational corporation's holding company. It has its main office in Omaha, Nebraska. The company holds a minority, majority, or entire stake in a number of public and private companies. Berkshire Hathaway owns GEICO, Coca-Cola, American Express, Wells Fargo, IBM, and Apple, among other companies. In 2016, Berkshire Hathaway had $621 billion in total assets, $283 billion in total equity, and $224 billion in total revenue (Chen et al., 2021). The corporation is the fourth-largest public company and the ninth-largest conglomerate by revenue in the world. The current paper discusses the culture of Berkshire Hathaway, how it deals with uncertainty in the market, and the environmental factors that impact it.
The Culture of the Company
Buffett had an interest in business and investing at an early age. He is renowned for saving $35 on his first tax return by delivering newspapers while riding his bicycle and watching television. Buffet has adopted the economic philosophy of "value investing," which combines "behavioural finance" and "investor psychology" and aims to comprehend how institutions, organizations, investors, and consumers make decisions based on how they act and think (Hartwig, 2019). Graham, an American economist, established his investment strategies while working as a financial consultant. Buffet's investing strategy, which has grown into the company's guiding principles and philosophy since he acquired Berkshire Hathaway over four decades ago, is largely responsible for Berkshire Hathaway's success. People have used his reputation for frugality in his personal life as leverage in negotiations. Even when losses have occurred, liabilities are considered sources of stress and strain in order to fulfill debtor commitments. This notion and value shape the culture of the organization. A "buy-and-hold" investment is one in which you purchase an asset and maintain it even if it loses value in the short term. This assumes that the nation's economy will eventually revive. Fundamental Analysis: According to this method, a company's financial statements can be used to determine the company's financial health. A contrarian perspective delays investing in a popular trend until it has been prevalent for some time. Activist investment is when an investor uses their ownership share in a company to exert pressure on management to perform well. Diversification requires placing only some of one's eggs in a single basket.
Berkshire Hathaway's investment strategy is founded on its fundamental principles and beliefs. It achieves this by investing in profitable companies that have been in business for a long time and are seen as necessities by ordinary customers, such as clothes, airlines, insurance, etc. Buffet has established a small core of dependable individuals to assist the company's success. This group consists of family members and Charlie Munger, his longtime friend and co-chair, who worked with Buffet as a teenager (Hartwig, 2019). By sharing their personal learning experiences and developing hypotheses based on behavioral economics, these individuals have become less anxious about navigating the market and accomplishing their goals.
How the Organization Deals with Uncertainty in the Market
Playing a Simple Numbers Game that Favors the Patient
Warren Buffett plays a numbers game with Berkshire Hathaway's investment portfolio, expanding on what has been mentioned previously. This game strongly favors investors with patience. If you examine the roughly 400 stocks in Berkshire Hathaway's investment portfolio or the 500 companies it has acquired over the past 50 years, you will notice a reoccurring theme: they almost always move in a circle (Loviscek & Xie, 2022). As the American economy develops, so do cyclical businesses. The difficulty is that economic expansions tend to last considerably longer than recessions. Buffett and his colleagues may relax and enjoy the fruits of their years of hard work and foresight now that they have diversified Berkshire's investment portfolio with companies that may benefit from sluggish growth.
Dividend Stocks
People typically miss the fact that dividend stocks contributed to Berkshire Hathaway's extraordinary success. Buffett's company, Berkshire Hathaway, is projected to earn nearly $6 billion in dividend income over the next 12 months. This is owing to the fact that it owns more than 30 stocks that pay regular dividends, which will provide this revenue. Monthly dividend-paying companies are often well-established and almost always profitable; otherwise, they could not afford to do so. These companies have proven their ability to endure challenging economic conditions and emerge stronger in the end. Moreover, dividend-paying stocks typically outperform those that do not pay dividends. The average annual return for public firms that began paying dividends in 1972 and grew them between 1972 and 2012 was 9.5%. During the same time period, non-dividend-paying public corporations generated an annualized return of only 1.6% (Salzar, 2019).
Environmental Factors that Impact the Organization
Using PESTEL analysis, Berkshire Hathaway could improve its strategic decision-making by identifying the major external environmental forces that influence its competitive landscape and strategy. To develop effective strategies and accomplish its long-term growth objectives, Berkshire Hathaway must conduct a PESTEL analysis. This is because Berkshire Hathaway wishes to expand and capitalize on its core skills.
Political Factors
The political components of a PESTEL analysis have a substantial effect on Berkshire Hathaway's long-term profitability potential. Because the company operates on a worldwide scale, it is more aware of political changes in other nations. In today's fast-paced, global economic environment, it is essential for political success to disperse systematic risks. There are various aspects that influence the political atmosphere of a country. During the course of strategic planning, Berkshire Hathaway must examine the following political issues: A high level of political stability produces a steady, favorable business climate with predictable market growth. However, political instability deters investors, erodes people's faith in the economy, and diminishes organizational performance. Each of the countries in which Berkshire Hathaway operates is undergoing political turmoil. Globally escalating political tensions and volatility could impede the expansion of the gold sector and make it more difficult for Berkshire Hathaway to expand. Changes in government policy frequently reduce the clarity of the environment, which is detrimental to economic success. Berkshire Hathaway should investigate current political trends because a change in leadership could alter the government's growth ambitions for specific businesses.
Economic Factors
Berkshire Hathaway must be cognizant of economic factors such as the foreign exchange/interest rate, the state of the labor market, inflation, and saving rates because they influence the economy as a whole. The economic understanding of Berkshire Hathaway enables the company to predict the growth of an industry or organization. Berkshire Hathaway must consider the following economic aspects when making decisions: The economic prosperity of a country has a direct effect on the performance of an organization. As economies expand, Berkshire Hathaway has a great deal of room to grow. Similarly, it is essential to comprehend the current stage of the industry. Because the market is already saturated, it may be more difficult to enter a mature industry than one that is currently expanding. Berkshire Hathaway's financial performance is also affected by the amount of money spent on basic infrastructure by the host country's government. The country's infrastructure supports business and contributes to the expansion of its gold industry. The rate of GDP expansion will affect Berkshire Hathaway's capacity to achieve its long-term growth objectives (Koekebakker & Zakamulin, 2021). A high GDP indicates that consumers have more disposable income to spend on goods. A high unemployment rate means that there are a lot of additional jobs available for lower pay. Berkshire Hathaway could cut its production costs if it enters this market. The business should also monitor the impact of the interest rate on people's capacity to borrow money and make investment decisions. The high-interest rate will boost investment and give Berkshire Hathaway extra growth opportunities. Lastly, fluctuations in the exchange rate can have an impact on global earnings and trade, and Berkshire Hathaway may have a lot to worry about depending on how the local currency varies.
Social Factors
Society's norms, values, and tendencies have a substantial impact on an organization's culture. By doing a thorough PESTEL analysis, Berkshire Hathaway can create effective marketing messages and attain its business goals. This is due to its familiarity with demographic patterns, power structures, consumer purchasing patterns, and popular ideas. Using sociological and environmental research data, Berkshire Hathaway's marketing department may target specific consumer groups and make its products more appealing to potential buyers. Berkshire Hathaway must incorporate the following sociological issues in its macro environmental analysis: For multinational firms like Berkshire Hathaway, demographic shifts such as an aging population, migration trends, and socioeconomic factors are crucial. Berkshire Hathaway can find the market segment or sectors with the highest growth potential by analyzing the demographic characteristics of each market segment (Koekebakker & Zakamulin, 2021). Additionally, migration influences how businesses run and sell themselves. Berkshire Hathaway must understand how the general public feels about migration, as this could impact the ease with which enterprises in the host country can recruit foreign managers. In every civilization, the power distance represents how people feel about hierarchy and economic differences. The corporate management practices of Berkshire Hathaway must adjust as it enters markets with a high or low power distance. As inequality increases, the power structure of many nations is shifting. This has a substantial effect on multinational firms like Berkshire Hathaway.
Technological Factors
Technology is the fourth component of PESTEL. Due to the rapid development and global diffusion of technology, it is more important than ever to comprehend technical components while making strategic decisions. A comprehensive analysis of the technical environment can aid Berkshire Hathaway in capitalizing on technological advancements and enjoying corporate benefits such as improved profits, rapid innovation, and more effective operations. The financial performance of Berkshire Hathaway may be affected by the following variables: As a result of the development of information and communication technology, it is now simple to utilize cutting-edge marketing techniques to increase consumer collaboration. Today's corporate sector is replete with social media users. Berkshire Hathaway can increase corporate performance through social media marketing (Koekebakker & Zakamulin, 2021). The firm can initiate innovative social media marketing by utilizing cutting-edge technologies to build online communities around your business. To maintain a competitive advantage, Berkshire Hathaway should continuously monitor the development of technology. It is essential to keep an eye on how 5G could improve business outcomes by delivering a better user experience, faster speeds, and more access. These technological advancements have the capacity to completely change an industry and rewrite the rules of commercial success. It is also essential to assess how the technology is evolving and its industrial maturity. By entering new markets where technology has yet to reach its full potential, Berkshire Hathaway can expand its market share.
Conclusion
The company holds a minority, majority, or entire stake in a number of public and private companies. Warren Buffett plays a numbers game with Berkshire Hathaway's investment portfolio, expanding on what has been mentioned previously. Buffett's company, Berkshire Hathaway, is projected to earn nearly $6 billion in dividend income over the next 12 months. To develop effective strategies and accomplish its long-term growth objectives, Berkshire Hathaway must conduct a PESTEL analysis. For example, Berkshire Hathaway must be cognizant of economic factors such as the foreign exchange/interest rate, the state of the labor market, inflation, and saving rates because they influence the economy as a whole.
The company’s strategy
It is well-known that Berkshire Hathaway is one of the most prosperous companies, representing excellent results as well as long-term growth. The corporation should concentrate on the organic structure, according to a review of the corporate governance policy. The company's managers can be contacted directly by the board of directors. This observation suggests that the organizational structure is flexible. The CEO of Berkshire Hathaway is not the company chairman, and he is expected to adhere to both task leadership and relationship leadership. The chairman or CEO dual role is somehow harmful to a company, and the advantages of independent board leadership depend on the circumstance. According to Bloomberg, Warren Buffett, who is regarded as the best investor of all time, has amassed a net worth of around $100 billion and is now the sixth richest person in the world (Finkle, 2023). Buffett stands out among the world's wealthy because he built his fortune by repeatedly putting his money into various companies before eventually acquiring control of Berkshire Hathaway, which now serves as his main investment vehicle.
In the administration of the businesses they acquire, Warren Buffett and Charlie Munger are renowned for being absent-minded. They trust that the firm managers are in the most advantageous position to make technical decisions for their enterprises, so they decentralize all decision-making to the owned companies. In this way, they are able to identify their area of expertise: they are adept at identifying companies to invest in, but they are aware that they are not the most qualified to manage them. The money gathered from the conglomerate's insurance subsidiaries is used as part of Berkshire Hathaway's investment strategy to invest in other companies at a significantly better rate of return. The plan has assisted the business in expanding to its current size. It will be challenging to sustain the business's historical returns, according to even Charlie Munger, because it is more difficult to locate undervalued investments when you have billions of dollars than when you only have a few million. Moreover, despite its enormous size, Berkshire Hathaway uses insurance businesses to generate "float," or income collected from insurance premiums before claims must be paid. Additionally, you can invest in companies with this float at a rate of return significantly higher than what must be paid out.
Comparing the strategy
The Carlyle Group is Berkshire Hathaway top competitors. Through the overall investment lifecycle, Carlyle strive to implement a consistent and repeatable value generating strategy. Global Portfolio Solutions (GPS), a framework for creating value, directs and empowers portfolio business management teams to improve operations, spur development, and increase impact. Furthermore, at Carlyle, they concentrate on the sectors in which they feel their extensive experience gives them a competitive edge (Munna, 2021). Together with top-tier CEOs and founders, their investment teams have created market-leading and industry-defining businesses. They aim to use their wealth of experience across all of their businesses in order to maximize long-term value and impact. Based on an analysis of 230 employee assessments for the two organizations, Berkshire Hathaway has a leadership culture rating that is a percentage greater than that of The Carlyle Group. The responses to questions like "How would you evaluate your CEO?" are what determine ratings.
Assessing both strategies
The strategies of Berkshire Hathaway and The Carlyle Group differ. Berkshire Hathaway has an advantage over other publicly traded corporations in that it is a very patient, long-term planner that does not mind bumpy results in the short-term and does not worry about pleasing others. Berkshire is willing to ensure less insurance and refrain from making deals when the market is unfavourable. Then, when the market turns, Buffett and Munger can pounce and profit from fantastic opportunities (Salzar, 2019). Munger points out that as Berkshire Hathaway expands, it will be difficult to match the outstanding historical returns generated by its investing approach. When you have $10 billion as opposed to $10 million, it is considerably more difficult to identify investments that are undervalued and have little competition. Basically, the personal success of every employee is closely tied to the organization's principles. It focuses on investments that are maximized for returns and related to the personal interests of most people worldwide because it is a financial company.
Employees are thought to prefer receiving financial advantages to stay motivated and dedicated to their work. Employees of Berkshires Hathaway have several noteworthy financial benefits. In addition, Warren Buffet persuades top executives of numerous other businesses around the globe to reinvest their profits in other businesses, strengthening their commitment to other businesses. On the other hand, the Carlyle Group is concentrated on locating and developing expansion opportunities inside sectors where they think they have a competitive edge and have the potential to have a significant effect. By encouraging resilient growth in market leaders, promoting transformational operational improvements, and fostering disruptive growth as well as geographic expansion, Carlyle aims to create better firms.
Berkshire Hathaway and The Carlyle Group are impacted by the same environmental factors. The Carlyle strategy for seizing opportunities related to the global energy transition is highlighted in the 2022 Impact Review, along with our initiatives to improve diversity, equity, and inclusion within our domains of influence. On the other hand, high ethical standards, integrity, and open reporting form the basis of Berkshire Hathaway Energy's sustainability culture. The long-term survival of their company depends on environmental stewardship as well as compliance as they work toward net zero greenhouse gas emissions. Berkshire Hathaway is more successful than The Carlyle Group since it is the most desired stocks and one of the largest corporations in the world (Triyadi, n.d). Thanks to the savvy investments of Warren Buffett, who bought the conglomerate in the middle of the 1960s, the corporation has gained notoriety. One this company could change to improve their strategy is changing their investors.
Motivational Strategies
When employees are inspired to do their best, businesses thrive. A key priority is building a vibrant workplace culture that attracts and keeps the best employees. Based on these needs, this discussion will investigate a strategy that can inspire the human capital of Berkshire Hathaway, a worldwide conglomerate holding business. The steps outlined in the plan are establishing a system for formally assessing employees' performance; introducing a pay structure that includes a base salary plus incentive pay; issuing company stock; and encouraging employee participation in the transition to the new system.
‘Explain whether you will or will not implement a formal performance evaluation process and defend why or why not’
Establishing a formal performance review system is excellent since it has maximized productivity, boosted morale, and reduced employee turnover (Johnson, 2015). Performance evaluation in its standard form can boost employee enthusiasm and productivity. Because of the significance, Berkshire Hathaway, place on performance, this is crucial. More importantly, however, a structured performance review procedure may aid in making the incentive system fairer and objective. Without a clear procedure, workers may feel that their performance is judged on a subjective basis, which may breed mistrust and discontent.
When combined with a competitive salary, bonuses, commissions, and stock options may inspire workers to give their all. Workers like the steadiness that comes with a basic salary, but commission incentives encourage them to go above and beyond. Offering stock options as a part of a remuneration package may encourage workers to think and behave like owners, better aligning their interests with the firm's long-term success. At the same time, bonuses give an extra incentive to go above and beyond.
What's more, offering perks like retirement plans, health insurance, and paid time off may assist in attracting and retaining the best employees. The research found that employee perks are positively related to work satisfaction, dedication, and retention (Liu and Zhang, 2017). Benefits demonstrate to workers that their efforts are valued and that the business cares about their well-being.
‘Describe the reward system you will use to motivate your employees in detail and why you have included each element fixed base pay, commission, bonus, stocks, benefits, holiday, vacation, etc.’
Motivating people is vital to the success of a firm. Motivated workers are more inventive, engaged, and productive at work. A complete incentive system may get utilized to incentivize Berkshire Hathaway staff. The compensation structure should comprise a basic salary, commission, bonus, stocks, benefits, vacation, and holiday time. This article will examine the numerous incentive factors that may get utilized to inspire workers, why these elements are significant, and how to manage the change process successfully.
Base pay is the primary component of remuneration for employees. It must be competitive and per industry norms. Competitive base pay helps to recruit and retain excellent people. What's more, it encourages workers to sustain high levels of job performance (Armstrong and Taylor, 2014). Employees who believe their pay is unfair or insufficient are likely to be demotivated, which may lead to decreased job satisfaction and productivity.
Payment plans focusing on sales commissions successfully boost sales force performance. Employees are encouraged to work harder and generate more sales using commission-based pay plans. Sales teams may benefit greatly from this incentive structure since pay is directly proportionate to results (Katz, 2017). Motivating staff via healthy competition and rewarding top performers with commission-based incentives is a win-win.
Bonuses are one-time payments given to employees in recognition of outstanding performance, reaching goals, or reaching significant milestones. O'Boyle et al. (2015) found that giving workers financial incentives to achieve predetermined goals increased productivity. Teamwork, going above and beyond one's job responsibilities, and a feeling of fairness in the reward system are all things that can get fostered through the use of bonuses.
Stock options may reward top performers and align employees' interests with the company's success. Employees who own company stock is likely get invested in the organization's long-term accomplishment and are more motivated to work harder (Wang et al., 2019). Stock options can motivate employees to work harder and achieve long-term goals.
Benefits such as healthcare, retirement plans, and paid time off can improve employees' overall job satisfaction and motivation (Jackson et al., 2014). Comprehensive benefit packages can help to attract and retain employees. Employees are more likely to be motivated when they feel their employer cares about their well-being and can get invested in their long-term success. Providing employees with ample vacation time can reduce his, her, their, etc. burnout., improve job satisfaction, and motivate employees to work harder (Griffin et al., 2017).
‘Describe your approach to rolling out and managing the change process required to transition from the current reward system to your new system’
It is crucial to consider several variables when creating an effective change management strategy, such as employee participation, communication, and training (Mishra and Bisht, 2014). A crucial element of the change management process is effective communication. According to a study by Dawson (2014), open communication reduces possible resistance by assisting staff in comprehending the reason for the change and what to expect. The new incentive system's alignment with the company's values and aims, as well as its advantages for workers, the business, and its clients, should be emphasized in the communication strategy.
Training is also crucial to ensuring a successful transition. According to research by Hayes and Abernathy (2018), comprehensive training is essential to help employees understand the new system's structure, how rewards are determined, and how it aligns with the company's goals and values. All employees need training, including managers, to ensure a clear understanding of the new reward system.
Another efficient method of managing change is to install the new system in phases. According to Kotter's eight-step approach, testing the new system in a single department before rolling it out throughout the whole organization will assist in discovering any adjustments that may be required and reduce business operations interruptions. This strategy also enables testing and system alterations before complete installation.
Critical elements of the change management process include ongoing monitoring and assessment of the new system's efficiency. Continuous monitoring and evaluation, according to a study by Ford and Randolph (2017), may assist in discovering areas where the new system can get improved, and any required modifications can get implemented.
All workers need to be informed straightforwardly about the new incentive system and openly to manage the transition process properly. Employee education on the new reward system's elements, the reasons for the changes, and how the new incentive system fits with the organization's objectives and values will be a part of this. During this process, it's crucial to provide staff members with plenty of chances to voice their questions, concerns, and criticisms. Managers should get training to explain the new incentive system adequately and be prepared to answer any queries or concerns that staff members may have. The managers should introduce the new incentive system at routine team meetings in their teams.
The effectiveness of the transition process depends on open and honest communication. It is critical to be open and honest with workers about salary information. The incentive system should be clearly explained to employees, including its components, the weights assigned to each, and the methodology for measuring it. Recognizing that certain pay data, such as individual employee wages or incentives, may need to remain secret is still vital. It's crucial to convey the value of maintaining confidentiality in these situations and to reassure everyone that the proceedings will be fair and equal.
The most potential barriers to change are likely to be employee unhappiness with the new payment system, a lack of comprehension of the new system, and reluctance to change. Implementing the following tactics will help you prepare for success in advance.
Employee participation in change initiatives is essential to effective change management. Employees should get involved in creating and implementing the new incentive program. Methods like focus groups, questionnaires, and other audience participation forms could get applied for this purpose. Spread the word about the advantages of the new setup. The benefits of the new incentive system must be made known to the staff. There may be more earnings potential, greater fairness and equality, and a stronger connection between money and the organization's mission and values.
It is essential to address employee concerns and answer their questions about the new compensation scheme. This may be achieved by consistent two-way communication, management training, and public debate spaces. Managers should get training and resources to help them successfully implement the new incentive system. Successes and accomplishments should be recognized and applauded appropriately during the transformation process. Employees' morale and progress toward the change's goal may get boosted this way.
In conclusion, it is possible to motivate Berkshire Hathaway's employees by instituting a formal performance evaluation process, providing a pay structure that includes base salary, commission, bonus, stock options, and benefits, and utilizing a mix of communication, training, and employee involvement strategies to overs
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